Shaping the Strategic Plan

Organizations' goals all too often fall short of stakeholder expectations. A primary contributor to this sad state of affairs is the fact that goal-setting tends to be based on past trends and current internal practices. The external perspective is frequently overlooked, yet customers' expectations are driven by their experiences with the best providers in the industry and superior providers in other industries. Benchmarking can capture these external references and provide a basis for comparative analysis.

Exhibit 2 shows some ways in which benchmarking can help to shape an organization's strategic direction. It depicts a typical strategic planning process for performance improvement that begins with an organization's vision for the future:

• The vision will always be influenced to some extent by the organization's business environment and what others have been able to achieve. Benchmarking supplies detailed analyses of this environment and a factual basis for understanding what it means to be world-class, thereby helping to bring the organization's vision into focus.
• Assessing current performance and measuring the distance from there to the vision are critical activities for ensuring an organization's long-term sustainability. While many tools are available for measuring current performance, including market research and competitor analysis, benchmarking adds the ability to clarify the organization's position in relation to both the external business environment and the vision and to identify performance gaps. It enables the organization to adjust its strategy so that it can close the gap between its current reality and its vision of the future.
• Long-term plans or key strategies derived from the vision comprise strategic goals that address all aspects of the organization's performance, including business process performance, product or service performance, competitive performance, and customer satisfaction. By necessity, these goals will be constantly evolving. Benchmarking analyses enable the organization to set these objectives based on the external reality.

How Good Do You Need to Be?

Benchmarking enables decision-makers to understand exactly how much improvement they'll need to accomplish in order to achieve superior performance. Frequent and regular benchmarking helps you to create specific and measurable short-term plans that are based on current reality rather than historical performance, and which can support step-by-step improvements in performance over time. The objective is to overtake the top performers, turning a performance deficit into performance leadership.

An implementation process is required to convert long- and short-term plans into operational plans. You'll need to know exactly how your specific strategic goals are to be met and who has responsibility for executing the necessary actions. You'll want to calculate and allocate the resources required and schedule and control the implementation. The output from your benchmarking effort feeds into this effort by providing vital information about best practices.

Benchmarking is a powerful tool that can significantly enhance an organization's ability to strategically manage its performance. It forces managers to consider the broader perspective, to learn from outstanding performers, and to push beyond their own comfort zones. By revealing the best practices of top-performing operations, it can place your organization firmly on the road to world-class leadership.

See a larger version of Figure 1.

See a larger version of Figure 2.